Why you should consider brand extension

Leslie Mupeti

Growing a brand is no easy feat. Most entrepreneurs and brand builders can tell you this. Any brand that has successfully found its footing in the market has earned a favourable reputation called Brand equity which gives the brand more leverage. Some brands use this leverage to increase their prices and earn more per product/service and some use this leverage to expand their products/services outside their primary market.

This expansion of a company’s products/services outside their primary market is called Brand extension. Brand extension can be defined as the use of an established brand name in new product categories.

This new category to which the brand is extended can be related to or unrelated to the existing product categories. An existing brand that gives rise to a brand extension is referred to as a parent brand. If the customers of the new business have values and aspirations matching those of the core business and if these values and aspirations are embodied in the brand, it is likely to be accepted by customers in the new business. Brand extension can also be known as brand stretching.

Extending a brand outside its core product category can be beneficial in a sense that it helps evaluating product category opportunities, identifies resource requirements, lowers risk and measures a brand’s relevance and appeal. Nash is a perfect example of a successful brand extension. The company was originally into paint manufacturing and they extended into content creation and the music business. An example of a failed brand extension would be the case of New Mazoe.

The company had forgotten what the core brand was meant to stand for and they were punished for that. The existing loyalty of the customers helps companies widen their reach. If consumers already know a brand and like it, it increases the chances of buying a new product from the same company. Even if they are not loyal customers, the brand’s brand awareness may have a positive impact. If done correctly, a brand extension can help a company diversify its products and earn more market share.

Types of Brand Extension

1. Current product form extension

Launching of an item similar to what was offered before but with brand new packaging. An example is when Microsoft started selling the Windows phone.

2. Extension of Companion product

Launching of a product that goes well with an already established product.

They will go very well together and maximise the value of each other when used together. For example the Apple iPhone and the Apple companion watch.

3. Extension of a benefit/feature

They knew product offers something that the older product already provides in different shapes and forms.

4. Vertical extensions

A business can offer something that it already produces in a more refined and finished form. For example, a company that produces plywood can also start offering chairs or other furniture as it uses the same material.

5. Distinctive taste, ingredient or component extension

A brand may develop a close association with a combination of taste. When it is well received in the market and survives long it enjoys a proprietary association of distinctive taste.

Capitalising on these properties, the brand could be leveraged in other product fields. For example, Bakers Inn, Chicken Inn, Fish Inn, Creamy Inn.

6. Extension of customer franchise

A product range is extended in order to meet the needs of a specific customer group.

For example, Nivea has specific lines of products catering for men through the Nivea for men line of products.

7. Extension of company expertise

-An extension can take the form of different product category introductions under a common name. Common expertise pool helps such introductions. For example, Honda offers Honda Cars, Honda scooters, Honda lawn mowers etc.

8. Extension of Brand image/prestige

New products may be introduced into unrelated product categories. A popular brand name is used in a host of unrelated products. For example, the Nash brand name is now used in products ranging from paints to music projects.

Advantages of brand extension

1. Audience growth. The new products attract a broader audience.
2. Increased brand awareness and brand equity growth.
3. The likelihood of gaining traction is increased. An established brand name increases consumer interest and willingness to try the new products having the established brand name.
4. Increased market share. A brand selling a single product has limited market share.
5. The efficiency of promotional expenditure increases. Advertising, selling and promotional costs are reduced. There are economies of scale as advertising for one brand and its extension reinforces the other.

Benefits of brand extension to the parent brand

1. The image of the parent brand is enhanced.
2. It revives the brand. The Apple brand was slowly losing its brand equity when they were still into PCs only until the release of the iPod and the iPhone.
3. It allows subsequent extension. When Apple extended their brand into iPods and iPhones, it made way for the subsequent introductions of the iWatch, Apple earbuds etc.
4. Brand meaning is clarified.
5. It increases market coverage as it brings new customers into brand franchise.
6. Customers will associate original/core brand to new product hence they will also have quality associations.

Disadvantages of brand extension

1. It may lead to loss of reliability if brand name is extended too far. An organization must research the product categories in which the established brand name will work.
2. There is a risk that the new product may generate implications that damage the image of the core/original brand.
3. If the brand extensions have no advantage over competitive brands in the new category, then it will fail.

There have been cases in history of unsuccessful brand extensions. A notable example is Colgate, the tooth paste company. The company thought that it was a good idea to enter the frozen food market. They started making frozen beef lasagna. Their brand, which has a strong association with oral hygiene prevented this from happening because most people thought “minty” when they first came across their packaged frozen foods. Nobody wants “minty fresh” beef lasagna.

On the other hand, the Colgate company has also had some successful brand extensions. At first they were purely into tooth paste and a natural brand extension for them was for them to start manufacturing tooth brushes.

In conclusion, a brand extension happens when a company releases a new product using its renowned brand name. The company leverages its well-known brand to offer new products to consumers and tries to get attention to the new offering. With an already established brand identity backing it up, customers trust the new products.